Chapter Three Information Systems Organizations and Strategy Md Golam Kibria Lecturer amp Coordinator Southeast University What is an Organization Technical definition Stable formal social structure that takes resources from environment and processes them to produce outputs ID: 612979
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Slide1
Management Information SystemsChapter Three
Information Systems, Organizations, and Strategy
Md.
Golam
Kibria
Lecturer & Coordinator
Southeast
UniversitySlide2
What is an Organization?Technical definition:
Stable, formal social structure that takes resources from environment and processes them to produce outputs
In the microeconomic definition of organizations, capital and labor (the primary production factors provided by the environment) are transformed by the firm through the production process into products and services (outputs to the environment). The products and services are consumed by the environment, which supplies additional capital and labor as inputs in the feedback loop.Slide3
Behavioral definition: A collection of rights, privileges, obligations, and responsibilities that is delicately balanced over a period of time through conflict and conflict resolutionSlide4
Organizations and Information Systems
Information technology and organizations influence one another
This complex two-way relationship is mediated by many factors, not the least of which are the decisions made—or not made—by managers. Other factors mediating the relationship include the organizational culture, structure, politics, business processes, and environment.Slide5
Features of Organizations
Routines and Business ProcessesOrganizational PoliticsOrganizational CultureOrganizational EnvironmentsOrganizational StructureSlide6
Routines and business processes
Routines (standard operating procedures)
Precise rules, procedures, and practices developed to cope with virtually all expected situations
Business processes: Collections of routines
Business firm: Collection of business processesSlide7Slide8
Organizational politics
Divergent viewpoints lead to political struggle, competition, and conflictPolitical resistance greatly hampers organizational changeSlide9
Organizational culture:
Encompasses set of assumptions that define goal and productWhat products the organization should produce
How and where it should be produced
For whom the products should be produced
May be powerful unifying force as well as restraint on changeSlide10
Organizational environments:
Organizations and environments have a reciprocal relationship
Organizations are open to, and dependent on, the social and physical environment
Organizations can influence their environments
Environments generally change faster than organizations
Information systems can be an instrument of environmental scanning, act as a lensSlide11
organizational structureEntrepreneurial:
Small start-up businessMachine bureaucracy: Midsize manufacturing firmDivisionalized bureaucracy:
Fortune 500 firms
Professional bureaucracy:
Law firms, school systems, hospitals
Adhocracy:
Consulting firmsSlide12
How Information Systems Impact Organizations and Business Firms
Economic impacts
Transaction cost theory
Firms seek to economize on transaction costs (the costs of participating in markets)
Vertical integration, hiring more employees, buying suppliers and distributors
IT lowers market transaction costs for a firm, making it worthwhile for firms to transact with other firms rather than grow the number of employees Slide13
Firms traditionally grew in size to reduce market transaction costs. IT potentially reduces the firms market
transaction costs. This means firms can outsource work using the market, reduce their employee head count and still grow revenues, relying more on outsourcing firms and external contractors.Slide14
How Information Systems Impact Organizations and Business Firms
Agency theory: Firm is nexus of contracts among self-interested parties requiring supervision
Firms experience agency costs (the cost of managing and supervising) which rise as firm grows
IT can reduce agency costs, making it possible for firms to grow without adding to the costs of supervising, and without adding employeesSlide15
How Information Systems Impact Organizations and Business Firms
Organizational and behavioral impactsIT flattens organizationsDecision making pushed to lower levels
Fewer managers needed (IT enables faster decision making and increases span of control)
Postindustrial organizations
Organizations flatten because in postindustrial societies, authority increasingly relies on knowledge and competence rather than formal positionsSlide16
Information systems can reduce the number of levels in an organization by providing managers with information to supervise larger numbers of workers and by giving lower-level employees more decision-making authority.Slide17
Organizational resistance to changeInformation systems become bound up in organizational politics because they influence access to a key resource – information
Information systems potentially change an organization’s structure, culture, politics, and workMost common reason for failure of large projects is due to organizational and political resistance to changeSlide18
Using Information Systems to Achieve Competitive
Advantage
Michael
Porter’s competitive forces model
Provides general view of firm, its competitors, and environment
Five competitive forces shape fate of firm
Traditional competitors
New market entrants
Substitute products and services
Customers
SuppliersSlide19Slide20
Traditional competitorsAll firms share market space with competitors who are continuously devising new products, services, efficiencies, switching costs
New market entrants Some industries have high barriers to entry, e.g. computer chip businessNew companies have new equipment, younger workers, but little brand recognitionSlide21
Substitute products and servicesSubstitutes customers might use if your prices become too high, e.g. iTunes substitutes for CDs
Customers Can customers easily switch to competitor’s products? Can they force businesses to compete on price alone in transparent marketplace?Suppliers
Market power of suppliers when firm cannot raise prices as fast as suppliersSlide22
Four
generic strategies for dealing with competitive forces, enabled by using ITLow-cost leadership Product differentiationFocus on market niche
Strengthen customer and supplier intimacySlide23
Low-cost
leadershipProduce products and services at a lower price than competitors while enhancing quality and level of serviceExamples: Wal-Mart
Product differentiation
Enable new products or services, greatly change customer convenience and experience
Examples: Google, Nike, AppleSlide24
Focus
on market nicheUse information systems to enable a focused strategy on a single market niche; specializeExample: Hilton Hotels Strengthen customer and supplier intimacy
Use information systems to develop strong ties and loyalty with customers and suppliers; increase switching costs
Example: Netflix, Amazon